Monday, December 27, 2010

Of Naxalism, Global Financial Crisis and the myriad Indian corruption shows we have just witnessed – Is there a Connection?

Disclaimer: You will need a little background of the topics involved here; otherwise you won’t be able to appreciate the ideas much.

Recently, I have been inundated by news all over every form of media – Internet, Newspapers, Blogs and TV – about things which otherwise look anything like “connected” but I somehow can’t help but see a pattern in it.

The latest case of Dr. Binayak Sen being given life imprisonment by our court of law for supposedly “seditious” behaviour raises too many questions. A very big one of who is ruling our country, the right or the left. I don’t see the leaders talking on having further economic reforms, making Right to Property againa Constitutional Right, and our party at the Centre and the main opposition, Congress and BJP can’t ever agree on any issue. But when it comes to Naxalism, both agree on one solution – KILL THE POOR. OLIGARCHIC DEMOCRACY! Another question of how the state can act against an individual in a manner which is “horrific” to say. Binayak Sen’s trial was not covered by media, but the judgements were slapped on our face by each newspaper, but now as it is coming up, there was very little or no proof of the kind of involvement which qualifies as sedition.

Another article I just read explained How a Handful of Merill Lynch Bankers Helped Blow Up Their Own Firm. It was a case of incentives perverse and unaligned with the long-term financial health of their own bank. Ultimately, the bank was sold to Bank of America.(For full story refer: http://www.minyanville.com/businessmarkets/articles/wall-st-financial-crisis-cdo-mortgage/12/23/2010/id/31869). The punchline of the case – What do you do when no one – not even your own traders—wants to buy supposedly safe mortgage backed securities. Till date, no one has been arrested for the wrongdoings of the crisis, and no one can be, because everything they did was totally lawful. Their “regulators” wanted them to go this way. What to say of govt. sponsored agencies doing the same thing!

Third case, Putin’s Palace by the Sea. Sergey Kolesnikov in Russia has written an open letter to the Russian President Dimitry Medvedev stating how a palace is being built on the Black Sea for the personal use of Vladimir Putin – Prime Minister of Russia. To this date the palace costs around 1billion US Dollars, mainly through a combination of corruption, bribery and theft (http://corruptionfreerussia.com). -“Communism or Crony Capitalism, the elites live it on the up & up.”

And finally, our homegrown scandals – CWG, 2G Scam, IPL, Adarsh Housing Society, Money Matters and recently the price hike of onions – which is not a “scandal” in itself, but has a link with all of the problems and causes here.

When I see all these issues connected, I see that most of what is wrong in world is the wrongdoing of two parties – The Government and the Elites. Naxalism is a problem out and out created by the state in two ways - the state itself was unable to perform on its basic requirements, and its regulations and huge bureaucratic structure prevent people from performing. And now to correct the wrongdoings – they are ready to kill people, whether naxals or people like Dr. Binayak who the state wants to wither off in jail. I don’t support naxalites, but I do support the idea that the state can’t get away by its own wrongdoing in this way.

Financial Crisis taught us one thing – how potent is the partnership between businesses and govt, and when the state comes and not just interferes but participates in the market, it creates havoc. The havoc which in this case threw the world economy in a pit from which it has still not recovered fully. We find all the same industry-state connections in all the scams in our motherland like IPL.

CWG and other scams – the people who benefitted are either the bureaucrats or their known ones in the industry. A palace is being built for private use of Prime Minister of a country synonymous with Communism.

The link which I mention in the title of this post between all the crisis is The Big State – with its supposedly unlimited powers – which is creating perverse incentives everywhere. Here in India, we pay international market price of steel, but we cry when onion prices go up. Are farmers not entitled to the gains if the price of their product increases in the market! Why a subsidy here? State distorts all the market efficiencies by entering into it with policies to appease one set of the people or the other.

My Verdict – You can call me a utopian, an optimist or a realist, but I see a system which can change the world for better. It is not a new one, but it is something that the governments so much rotten in corruption and the misuse of their power don’t want to go towards.

The system of a limited government, a free-market (i.e. Laissez Faire capitalism and not corporatism) but with checks and balances.

Firstly, countries like India, where the state is huge and over & above the individual citizens, its powers need to be curbed. As they say – Power Corrupts and absolute power corrupts absolutely. Our bureaucrats need to realize that we, the individual citizens, are the Principal, State our agent and they (the Baabus) are the service providers. The Indian State needs to come out of the thought that it is our “mai baap” and needs to provide for our livelihood. Let the people work and create wealth.

Checks and Balances – This directs me to another issue, MFIs in Hyderabad. Never were poor people able to start businesses before the presence of MFIs. But now when some “sharks” have entered in the business, the state govt. has got an excuse to strangulate the industry because in our country , the Politicians and the Baabus are supposed to provide for poor – they can’t work for themselves, right!

Now to protect innocent villagers from sharks, some checks from regulators are needed, but that doesn’t mean that the business and industry should work according to whims and fancies of State/Regulators.

I propose a system wherein each individual gets a basic monetary amount if he/she is unemployed (no subsidies just because an individual produces potatoes instead of steel). Whatever the profession, if you are good at it – good for you, if you can’t earn bread for yourself – we, as citizens of a civilized society have a responsibility – and the unemployed should get a basic amount to live. It ends there. Every other help can be done through Private Charity.

Free Market – when every one of us is entitled to an amount which we can sustain our lives with – we are free to do thereafter whatever we want to come out of poverty and create wealth for ourselves and others. The market (that is the society) will decide whether our products or services are liked by our peers, and we can create our own destiny with our own decisions.

I am hopeful that we will see the day when the world comes out of utter confusion and our once great country becomes great again. There is even an outfit working on the same ideas – Freedom Team of India. Those who liked this post and subscribe to the ideas, do google about this Team and join/help in anyway you can.

Nice post mayank :) but i guess the idea of free market and the basic monetary amount to an individual if unemployed , is a way too idealistic and optimistic... dont u think so...And yaa this can be the solution to financial crisis but just that the day is far abi :)

Optimistic and idealistic, definitely yes! But not at all utopian. It is totally realistic. And if the Government right now scraps all its so called social welfare programs, amount to unemployed people should be taken care of.